How Corporate Governance Practices and Financial Performance in Banks Respond to COVID-19 Pandemic? A Panel VAR Approach

Abstract: This research aims to investigate the transmission effect of the COVID-19 pandemic shock on the corporate governance practices and financial performance in the case of Tunisian quoted banks. We employ a Panel Vector Autoregressive (PVAR) model for the period from 2016 to 2021. On the one hand, the impulse response analysis sheds lights that the COVID-19 pandemic causes a decrease in corporate governance index in the short term, suggesting a decrease in corporate governance practices of banks after the occurrence of the COVID-19 crisis. In addition, the empirical results underline a decline in market performance measured by Marris ratio and a drop in accounting performance measured by Return on Equity (ROE) and Return on Investment (ROI) of Tunisian banks in the short term. On the second hand, the variance decomposition results underline that corporate governance index, Marris ratio, Return on Equity (ROE) and Return on Investment (ROI) are more sensitive to COVID-19 pandemic shocks. Keywords: Panel Vector Autoregressive, COVID-19 crisis, Corporate governance practices, Corporate governance index; Financial Performance JEL Classification Number: G21, G28, G34, G38